Indonesia’s September headline inflation rose by the slowest pace in three years at 1.8% yoy from 2.1% the month before, experiencing a decline in sequential terms for the fifth consecutive month. Food (beverages and tobacco) inflation is off its March peak, easing to 2.6% yoy in the month. The transportation segment is also on a downtrend. Core inflation rose slightly to 2.1% from Aug’s 2.0%. Dissipating price pressures are also reflected in the volatile and administered categories, as supply-side pressures accompany subdued demand-pull forces. Sharp gains in the rupiah in the past two months have also kept a lid on imported forces. Considering the year-to-date average of 2.5% and our sub-2% forecast for the remaining four months of 2024, we lower our annual projection to 2.3% from 2.8% currently. With the US Fed embarking on its rate cut path, firmer rupiah and easing inflation at home, we expect the Bank Indonesia to utilize its significant real rate buffer to cut the benchmark rate by another 25bp to 5.75% in 4Q24.
The new government led by President-elect Prabowo Subianto will officially take office on October 20, with the cabinet line-up likely to be announced soon after. Amongst the most keenly watched will the Finance Minister’s post. Earlier in the year, speculation was that the contenders included a former Finance minister, financial regulator chief, and a Deputy Minister. Notably, the incoming government plans to reorganize the Finance ministry’s responsibilities by hiving off the revenue department to form a State Revenue Agency in January 2025, by merging the Directorate General of Taxes and Directorate General of Customs & Excise. This would see the new FinMin responsible for budgeting and expenditure, amongst others. A separate institution to focus on revenues is intended to channelize efforts towards improving collections, with persistently low receipts as % of GDP being a crucial constraint of fiscal policy. Key decisions on this front will include, in the near-term, whether the planned 1% increase in the VAT goes ahead next year, besides medium-term goals to widen the tax base and improve due diligence to boost collections on a sustained basis.
Topic
Explore more
E & S Macro StrategyGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.